-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VHJsL+AW+VzgbtmtYzDWO7JG82nh7el3imv8SXgKT8Vwei0tiu8n0WM30O802BMk 4utlIrow3pAwX3GDmhGgHQ== 0000914748-97-000004.txt : 19970501 0000914748-97-000004.hdr.sgml : 19970501 ACCESSION NUMBER: 0000914748-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970430 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVEREST REINSURANCE HOLDINGS INC CENTRAL INDEX KEY: 0000914748 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 223263609 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-71652 FILM NUMBER: 97591291 BUSINESS ADDRESS: STREET 1: THREE GATEWAY CENTER CITY: NEWARK STATE: NJ ZIP: 07102 BUSINESS PHONE: 2018028000 MAIL ADDRESS: STREET 1: THREE GATEWAY CENTER CITY: NEWARK STATE: NJ ZIP: 07102 FORMER COMPANY: FORMER CONFORMED NAME: PRUDENTIAL REINSURANCE HOLDINGS INC DATE OF NAME CHANGE: 19931115 10-Q 1 EVEREST REINSURANCE HOLDINGS, INC. 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended: Commission File Number: MARCH 31, 1997 1-13816 - -------------- ------- EVEREST REINSURANCE HOLDINGS, INC. ---------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 22-3263609 -------- ---------- (State or other juris- IRS Employer Identification diction of incorporation Number) or organization) 3 GATEWAY CENTER NEWARK, NEW JERSEY 07102 ------------------------ (201) 802-8000 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. YES X NO --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Number of Shares Outstanding Class at April 29, 1997 ----- ----------------- COMMON STOCK, $.01 PAR VALUE 50,463,552 EVEREST REINSURANCE HOLDINGS, INC. INDEX TO FORM 10-Q PART I FINANCIAL INFORMATION --------------------- PAGE ITEM 1. FINANCIAL STATEMENTS ---- -------------------- Consolidated Balance Sheets at March 31, 1997 (unaudited) and December 31, 1996 3 Consolidated Statements of Operations for the three months ended March 31, 1997 and 1996 (unaudited) 4 Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 1997 and 1996 (unaudited) 5 Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996 (unaudited) 6 Notes to Consolidated Interim Financial Statements 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS ------------------------------------ OF FINANCIAL CONDITION AND RESULTS OF ------------------------------------- OPERATIONS 11 ---------- PART II OTHER INFORMATION ----------------- ITEM 1. LEGAL PROCEEDINGS 14 ----------------- ITEM 2. CHANGES IN SECURITIES None --------------------- ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ------------------------------- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF ---------------------------------- SECURITY HOLDERS None ---------------- ITEM 5. OTHER INFORMATION 14 ----------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14 -------------------------------- PART I - ITEM 1 EVEREST REINSURANCE HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except par value per share)
March 31, December 31, ------------------------------ ASSETS: 1997 1996 ----------- ----------- (unaudited) Fixed maturities - held to maturity, at amortized cost (market value: 1997, $85,508; 1996, $88,374) $ 78,974 $ 80,522 Fixed maturities- available for sale, at market value (amortized cost: 1997, $3,258,944; 1996, $3,194,246) 3,285,285 3,281,972 Equity securities, at market value (cost: 1997, $132,182; 1996, $115,367) 161,585 147,280 Short-term investments 52,500 49,486 Other invested assets 14,245 12,750 Cash 45,283 52,595 ----------- ----------- Total investments and cash 3,637,872 3,624,605 Accrued investment income 53,570 50,211 Premiums receivable 244,078 218,087 Reinsurance receivables 730,089 749,062 Funds held by reinsureds 171,837 173,386 Deferred acquisition costs 80,316 84,123 Prepaid reinsurance premiums 8,482 5,265 Deferred tax asset 150,881 124,664 Other assets 11,062 9,949 ----------- ----------- TOTAL ASSETS $ 5,088,187 $ 5,039,352 =========== =========== LIABILITIES: Reserve for losses and loss adjustment expenses $ 3,265,220 $ 3,246,858 Unearned premium reserve 359,830 355,908 Funds held under reinsurance treaties 194,890 177,921 Losses in the course of payment 44,357 24,343 Contingent commissions 82,897 83,279 Other net payable to reinsurers 9,293 8,779 Current federal income taxes 18,936 25,879 Other liabilities 40,085 30,362 ----------- ----------- Total liabilities 4,015,508 3,953,329 ----------- ----------- STOCKHOLDERS' EQUITY: Preferred stock, par value: $0.01; 50 million shares authorized; no shares issued and outstanding -- -- Common stock, par value: $0.01; 200 million shares authorized; 50.8 million shares issued 508 508 Paid-in capital 389,202 389,196 Unearned compensation (324) (374) Net unrealized appreciation (depreciation) of investments, net of deferred income taxes 36,234 77,766 Cumulative foreign currency translation adjustment, net of deferred income taxes (4,666) (354) Retained earnings 658,945 626,501 Treasury stock, at cost; 0.3 million shares (7,220) (7,220) ----------- ----------- Total stockholders' equity 1,072,679 1,086,023 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,088,187 $ 5,039,352 =========== =========== The accompanying notes are an integral part of the consolidated financial statements.
3 EVEREST REINSURANCE HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts)
Three Months Ended March 31, --------------------------- 1997 1996 --------- --------- (unaudited) REVENUES: Premiums earned $ 230,443 $ 210,269 Net investment income 54,042 44,768 Net realized capital gain/(loss) (199) 3,812 Other income/(loss) 3,234 (376) --------- --------- 287,520 258,473 --------- --------- CLAIMS AND EXPENSES: Incurred loss and loss adjustment expenses 166,841 155,125 Commission and brokerage expenses 61,045 54,479 Other underwriting expenses 13,709 13,871 --------- --------- 241,595 223,475 --------- --------- INCOME BEFORE TAXES 45,925 34,998 Income tax 11,461 7,247 --------- --------- NET INCOME $ 34,464 $ 27,751 ========= ========= PER SHARE DATA: Average shares outstanding (000's) 50,490 50,793 Net income per share $ 0.68 $ 0.55 ========= ========= The accompanying notes are an integral part of the consolidated financial statements.
4 EVEREST REINSURANCE HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Dollars in thousands, except per share amounts)
Three Months Ended March 31, -------------------------------- 1997 1996 ------------ ------------ (unaudited) COMMON STOCK (shares outstanding): Balance, beginning of period 50,490,273 50,792,869 Issued during the period 400 -- ------------ ------------ Balance net of treasury stock, end of period 50,490,673 50,792,869 ============ ============ COMMON STOCK (par value): Balance, beginning of period $ 508 $ 508 Issued during the period -- -- ------------ ------------ Balance, end of period 508 508 ------------ ------------ ADDITIONAL PAID IN CAPITAL: Balance, beginning of period 389,196 387,349 Common stock issued during the period 6 -- ------------ ------------ Balance, end of period 389,202 387,349 ------------ ------------ UNEARNED COMPENSATION: Balance, beginning of period (374) (692) Net decrease during the period 50 90 ------------ ------------ Balance, end of period (324) (602) ------------ ------------ NET UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS, NET OF DEFERRED INCOME TAXES: Balance, beginning of period 77,766 83,726 Net (decrease) during the period (41,532) (42,008) ------------ ------------ Balance, end of period 36,234 41,718 ------------ ------------ CUMULATIVE TRANSLATION ADJUSTMENTS, NET OF DEFERRED INCOME TAXES: Balance, beginning of period (354) (7,838) Net (decrease) during the period (4,312) (1,517) ------------ ------------ Balance, end of period (4,666) (9,355) ------------ ------------ RETAINED EARNINGS: Balance, beginning of period 626,501 520,541 Net income 34,464 27,751 Dividends declared ( $0.04 per share in 1997 and $0.03 per share in 1996) (2,020) (1,524) ------------ ------------ Balance, end of period 658,945 546,768 ------------ ------------ TREASURY STOCK AT COST: Balance, beginning of period (7,220) -- Treasury stock acquired during period -- -- ------------ ------------ Balance, end of period (7,220) -- ------------ ------------ TOTAL STOCKHOLDERS' EQUITY, END OF PERIOD $ 1,072,679 $ 966,386 ============ ============ The accompanying notes are an integral part of the consolidated financial statements.
5 EVEREST REINSURANCE HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Three Months Ended March 31, -------------------------- 1997 1996 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: (unaudited) Net income $ 34,464 $ 27,751 Adjustments to reconcile net income to net cash provided by operating activities: (Increase) in premiums receivable (28,549) (1,482) Decrease in funds held by reinsureds, net 16,776 24,527 (Increase) decrease in reinsurance receivables 19,104 (33,448) (Increase) in deferred tax asset (3,905) (3,105) Increase in reserve for losses and loss adjustment expenses 34,812 71,753 Increase in unearned premiums 6,730 9,399 Decrease in other assets and liabilities 6,760 5,320 Non cash compensation expense 50 90 Accrual of bond discount/ amortization of bond premium (347) 756 Realized capital (gains) losses 199 (3,812) --------- --------- Net cash provided by operating activities 86,094 97,749 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from fixed maturities matured/called - held to maturity 2,155 4,393 Proceeds from fixed maturities matured/called - available for sale 60,394 18,820 Proceeds from fixed maturities sold - available for sale 291,262 99,191 Proceeds from equity securities sold 10,379 31,718 Cost of fixed maturities acquired - held to maturity -- (25) Cost of fixed maturities acquired - available for sale (443,374) (171,735) Cost of equity securities acquired (13,326) (30,171) Cost of other invested assets acquired (1,495) (192) Net (purchases) of short-term securities (1,611) (32,928) Net increase (decrease) in unsettled securities transactions 11,379 (1,214) Net increase (decrease) in collateral for loaned securities -- 1,777 --------- --------- Net cash (used in) investing activities (84,237) (80,366) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Common stock issued during the period 6 -- Dividends paid to stockholders (2,020) (1,524) --------- --------- Net cash (used in) financing activities (2,014) (1,524) --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH: (7,155) (1,154) --------- --------- Net increase (decrease) in cash (7,312) 14,705 Cash, beginning of period 52,595 50,912 --------- --------- Cash, end of period $ 45,283 $ 65,617 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION Cash transactions: Income taxes paid, net $ 19,211 $ 11,858 The accompanying notes are an integral part of the consolidated financial statements.
6 EVEREST REINSURANCE HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (DOLLARS IN THOUSANDS) 1. GENERAL Certain financial information which is normally included in annual financial statements prepared in accordance with generally accepted accounting principles has been omitted since it is not required for interim reporting purposes. The consolidated financial statements of Everest Reinsurance Holdings, Inc. (the "Company") for the three months ended March 31, 1997 and 1996 include all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair presentation of results on an interim basis. The year end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The results for the three months ended March 31, 1997 and 1996 are not necessarily indicative of the results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 1996, 1995 and 1994. 2. CONTINGENCIES The Company continues to receive claims under expired contracts which assert alleged injuries and/or damages relating to or resulting from toxic torts, toxic waste and other hazardous substances, such as asbestos. The Company's asbestos claims typically involve potential liability for bodily injury from exposure to asbestos or for property damage resulting from asbestos or products containing asbestos. The Company's environmental claims typically involve potential liability for (i) the mitigation or remediation of environmental contamination or (ii) bodily injury or property damages caused by the release of hazardous substances into the land, air or water. The Company's reserves include an estimate of the Company's ultimate liability for asbestos and environmental claims for which ultimate value cannot be estimated using traditional reserving techniques. There are significant uncertainties in estimating the amount of the Company's potential losses from asbestos and environmental claims. Among the complications are: (i) potentially long waiting periods between exposure and manifestation of any bodily injury or property damage; (ii) difficulty in identifying sources of asbestos or environmental contamination; (iii) difficulty in properly allocating responsibility and/or liability for asbestos or environmental damage; (iv) changes in underlying laws and judicial interpretation of those laws; (v) potential for an asbestos or environmental claim to involve many insurance providers over many policy periods; (vi) long reporting delays, both from insureds to insurance companies and ceding companies to reinsurers; (vii) limited historical data concerning asbestos and environmental losses; (viii) questions concerning interpretation and application of insurance and reinsurance coverage; and (ix) uncertainty regarding the number and identity of insureds with potential asbestos or environmental exposure. 7 EVEREST REINSURANCE HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (DOLLARS IN THOUSANDS) Management believes that these issues are not likely to be resolved in the near future. The Company establishes reserves to the extent that, in the judgment of management, the facts and prevailing law reflect an exposure for the Company or its ceding company. In connection with its initial public offering in October 1995, the Company purchased an aggregate stop loss retrocession agreement (the "Stop Loss Agreement") from Gibraltar Casualty Company ("Gibraltar"), an affiliate of the Company's former parent, The Prudential Insurance Company of America ("The Prudential"). This coverage protects the Company's consolidated earnings against up to $375.0 million of the first $400.0 million of adverse development, if any, on the Company's consolidated reserves for losses, allocated loss adjustment expenses and uncollectible reinsurance at June 30, 1995 (December 31, 1994 for catastrophe losses). Due to the uncertainties discussed above, the ultimate losses may vary materially from current loss reserves and, if coverage under the Stop Loss Agreement is exhausted, could have a material adverse effect on the Company's future financial condition, results of operations and cash flows. The following table shows the development of prior year asbestos and environmental reserves on both a gross and net of retrocessional basis for the three months ended March 31, 1997 and 1996:
Three Months Ended March 31, 1997 1996 --------- --------- Gross Basis: Beginning of period reserves $ 423,336 $ 428,495 Incurred losses 11,198 2,596 Paid losses (5,849) (7,324) --------- --------- End of period reserves $ 428,685 $ 423,767 ========= ========= Net Basis: Beginning of period reserves $ 200,989 $ 197,668 Incurred losses -- -- Paid losses 896 (181) --------- --------- End of period reserves $ 201,885 $ 197,487 ========= =========
8 EVEREST REINSURANCE HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (DOLLARS IN THOUSANDS) At March 31, 1997, the gross reserves for asbestos and environmental losses were comprised of $105,459 representing case reserves reported by ceding companies, $48,943 representing additional case reserves established by the Company on assumed reinsurance claims, $56,254 representing case reserves established by the Company on direct excess insurance claims and $218,029 representing IBNR reserves. To the extent loss reserves on assumed reinsurance need to be increased and were not ceded to unaffiliated reinsurers under existing reinsurance agreements, the Company would be entitled to certain reimbursements under the Stop Loss Agreement. To the extent loss reserves on direct excess insurance policies needed to be increased and were not ceded to unaffiliated reinsurers under existing reinsurance agreements, the Company would be entitled to 100% protection from Gibraltar under a retrocessional agreement in place since 1986. While there can be no assurance that reserves for and losses from these claims would not increase in the future, management believes that the Company's existing reserves and ceded reinsurance arrangements, including reimbursements available under the Stop Loss Agreement, lessen the probability that such increases, if any, would have a material adverse effect on the Company's financial condition, results of operations or cash flows. The Company is also named in various legal proceedings incidental to its normal business activities. In the opinion of management, none of these proceedings is likely to have a material adverse effect upon the financial condition, results of operations or cash flows of the Company. The Prudential sells annuities which are purchased by property and casualty insurance companies to settle certain types of claim liabilities. In 1993 and prior, the Company, for a fee, accepted the claim payment obligation of the property and casualty insurer, and, concurrently, became the owner of the annuity or assignee of the annuity proceeds. In these circumstances, the Company would be liable if The Prudential were unable to make the annuity payments. The estimated cost to replace all such annuities for which the Company was contingently liable at March 31, 1997 was $137,179. The Company has purchased annuities from an unaffiliated life insurance company to settle certain claim liabilities of the Company. Should the life insurance company become unable to make the annuity payments, the Company would be liable. The estimated cost to replace such annuities at March 31, 1997 was $9,393. 3. NEW ACCOUNTING STANDARD In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 establishes new standards for computing and presenting earnings per share ("EPS"), including replacing primary EPS, as defined by APB Opinion No. 15, with basic EPS, requiring dual presentation of basic and diluted EPS on the face of the statement of operations for all entities with complex capital 9 EVEREST REINSURANCE HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (DOLLARS IN THOUSANDS) structures and requiring certain disclosures. SFAS 128 is effective for financial statements issued for periods ending after December 15, 1997 and requires restatement of all prior period EPS data presented. The Company has calculated basic and diluted EPS, as defined by SFAS 128, and determined that such amounts do not differ materially from primary EPS amounts historically presented in the Company's statements of operations. 4. SUBSEQUENT EVENT On April 15, 1997, the Company acquired 29,996 shares of its common stock at a cost of $808 from the Company's Chief Executive Officer to fund the Chief Executive Officer's remaining income tax liability resulting from the October 1995 grant of common stock under the Company's 1995 Stock Incentive Plan. 10 PART I - ITEM 2 EVEREST REINSURANCE HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996 PREMIUMS. Gross premiums written increased 7.0% to $246.0 million in the three months ended March 31, 1997 from $230.0 million in the three months ended March 31, 1996. Factors contributing to this increase included a 59.6% increase (to $21.4 million) in U.S. facultative operations, reflecting growth in all three lines of business (property, casualty and specialty casualty) as this unit continues to do well following its 1995 restructuring and in light of significant dislocation in the market, a 22.6% increase (to $45.4 million) in U.S. direct treaty reinsurance and insurance operations, largely attributable to growth in primary insurance written through Everest National, and a 9.1% increase (to $85.3 million) in international operations, driven by the business produced through the Company's London operations and modest growth in most other areas of the world. Gross premiums written in marine, aviation and surety operations were essentially flat (at $36.6 million) as marine acceptances were scaled back in light of rate decline in that market and a change in reinsurance buying among surety insurers adversely affected volume in that market. The increases were partially offset by an 11.6% decrease (to $57.3 million) in U.S. broker treaty operations, attributable to maintaining underwriting standards in the face of a difficult competitive environment. Ceded premiums increased 8.7% to $12.2 million in the three months ended March 31, 1997 from $11.2 million in the three months ended March 31, 1996. This increase was principally attributable to common account retrocessions by ceding sources. Net premiums written increased by 6.9% to $233.8 million in the three months ended March 31, 1997 from $218.7 million in the three months ended March 31, 1996 as the increases in gross premiums written more than offset the increase in ceded premiums. REVENUES. Net premiums earned increased by 9.6% to $230.4 million in the three months ended March 31, 1997 from $210.3 million in the three months ended March 31, 1996, generally consistent with the growth in net premiums written over the preceding year. Net investment income increased 20.7% to $54.0 million in the three months ended March 31, 1997 from $44.8 million in the three months ended March 31, 1996, reflecting principally the effect of investing the $402.3 million of cash flow in the twelve months ended March 31, 1997 and an increase in the annualized pre-tax yield on average cash and invested assets to 6.1% in the three months ended March 31, 1997 from the 5.7% yield in the three months ended March 31, 1996. 11 Net realized capital losses were ($0.2) million in the three months ended March 31, 1997, compared to gains of $3.8 million in the three months ended March 31, 1996. The net realized capital loss in the three months ended March 31, 1997 reflected realized capital gains on the Company's common stock investments which were more than offset by realized capital losses on its fixed maturity investments as the Company continued to seek enhanced yield on its fixed maturity investment portfolio. EXPENSES. Incurred losses and loss adjustment expenses ("LAE") increased by 7.6% to $166.8 million in the three months ended March 31, 1997 from $155.1 million in the three months ended March 31, 1996. The Company's loss and LAE ratio decreased by 1.4 percentage points to 72.4% in the three months ended March 31, 1997 from 73.8% in the three months ended March 31, 1996 principally as a result of changes in business mix in line with the Company's disciplined underwriting strategies. Net incurred losses and LAE for the three months ended March 31, 1997 reflected ceded losses and LAE of $12.3 million, including $5.3 million ceded under the Stop Loss Agreement, compared to ceded losses and LAE of $52.4 million, including $18.9 million ceded under the Stop Loss Agreement, in the three months ended March 31, 1996. Underwriting expenses increased by 9.4% to $74.8 million in the three months ended March 31, 1997 from $68.4 million in the three months ended March 31, 1996. Commission and brokerage expenses increased by $6.6 million, principally relating to premium growth as well as the impact of changes in the business mix. Other underwriting expenses for the three months ended March 31, 1997 decreased by $0.2 million to $13.7 million from the three months ended March 31, 1996 reflecting the impact of the Company's continuing expense reduction initiatives. The Company's expense ratio decreased by 0.1 percentage points to 32.4% in the three months ended March 31, 1997 from 32.5% in the three months ended March 31, 1996. The Company's combined ratio decreased to 104.8% in the three months ended March 31, 1997 from 106.3% in the three months ended March 31, 1996. INCOME TAXES. The Company recognized income tax expense of $11.5 million in the three months ended March 31, 1997 compared to $7.2 million in the three months ended March 31, 1996 as pretax income in the three months ended March 31, 1997 increased to $45.9 million from $35.0 million in the three months ended March 31, 1996, with tax-preferenced investment income comprising a smaller percentage of pretax income. NET INCOME. Net income was $34.5 million in the three months ended March 31, 1997 compared to $27.8 million in the three months ended March 31, 1996. This mainly reflected improved underwriting results and higher investment income partially offset by increased taxes and the absence of net realized capital gains. FINANCIAL CONDITION INVESTED ASSETS. Aggregate invested assets, including cash and short-term investments, were $3,637.9 million at March 31, 1997 and $3,624.6 million at December 31, 1996. The increase in invested assets between December 31, 1996 and March 31, 1997 resulted primarily from cash flow from operations of $86.1 million generated during the three months ended March 31, 1997 partially offset by a decrease of $64.1 million in net appreciation on investments. 12 STOCKHOLDERS' EQUITY. Holdings' stockholders' equity decreased to $1,072.7 million as of March 31,1997, from $1,086.0 million as of December 31, 1996 principally reflecting decreases of $41.5 million in net unrealized appreciation on investments, net of deferred taxes, which were partially offset by net income of $34.5 million for the three months ended March 31, 1997. Dividends of $2.0 million were declared and paid by Holdings in the three months ended March 31, 1997. 13 EVEREST REINSURANCE HOLDINGS, INC. OTHER INFORMATION Part II - ITEM 1. LEGAL PROCEEDINGS The Company is subject to litigation and arbitration in the normal course of its business. Management does not believe that any such pending litigation or arbitration will have a material adverse effect on the Company's results of operations, financial condition or cash flows. Part II - ITEM 5. OTHER INFORMATION Effective May 12, 1997, the address of the Company's principal executive office will be Westgate Corporate Center, 477 Martinsville Road, P.O. Box 830, Liberty Corner, N.J. 07938-0830 and the phone number will be (908) 604-3000. Part II - ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit Index: Exhibit No. Description Location ----------- ----------- -------- 11.1 Statement regarding computation of per-share earnings Filed herewith 27.1 Financial Data Schedule Filed herewith (b) Reports on Form 8-K: There were no reports filed on Form 8-K for the three months ended March 31, 1997. 14 EVEREST REINSURANCE HOLDINGS, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Everest Reinsurance Holdings, Inc. (Registrant) - By: /s/ Robert P. Jacobson ------------------ Robert P. Jacobson Duly Authorized Officer, Senior Vice President, Chief Financial Officer and Comptroller Dated: April 29, 1997 EX-11.1 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11.1 EVEREST REINSURANCE HOLDINGS, INC. COMPUTATION OF EARNINGS PER SHARE TREASURY STOCK METHOD MARCH 31, 1997 (DOLLARS IN THOUSANDS)
PRIMARY FULLY DILUTED EARNINGS EARNINGS PER SHARE PER SHARE ----------- ----------- Net income $ 34,464 Weighted average common shares outstanding 50,490,384 Earnings per share based on weighted average of common shares $ 0.68 =========== Dilutive effect of stock options 234,202 242,486 Average number of common shares outstanding 50,490,384 50,490,384 Average number of common and common equivalent shares outstanding 50,724,586 50,732,870 Net income $ 34,464 $ 34,464 Earnings per share $ 0.68 $ 0.68 =========== ===========
EX-27 3 FDS FOR EVEREST REINSURANCE HOLDINGS, INC. 10-Q
7 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 3,285,285 78,974 85,508 161,585 0 0 3,592,589 45,283 730,089 80,316 5,088,187 3,265,220 359,830 0 0 0 0 0 508 1,072,171 5,088,187 230,443 54,042 (199) 3,234 166,841 (3,295) 71,459 45,925 11,461 34,464 0 0 0 34,464 0.68 0 3,246,858 0 0 0 0 3,265,220 0
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